Solutions to the student loan problem
With 70% of college graduates now leaving school with debt and the national student loan debt now at $1.3 trillion and growing, there have been many proposed solutions on how to combat the country’s student loan problem.
According to Martin O’Malley, the former governor of Maryland, the federal government must act swiftly to stop the student debt problem in its tracks.
Relief for student loan borrowers
While the government lowered interest rates on student loans in 2013, there is still little relief out there for borrowers already suffering from student loan debt.
In a recent op-ed for The Washington Post, O’Malley proposes two important solutions to the student debt problem.
Refinance student loans
First, he says Congress must allow students to refinance the debt they have.
Unlike homeowners or businesses, student borrowers can’t refinance their loans to take advantage of lower interest rates through the government, so many are left with student loans at rates of 7% or higher that they took out before the interest rate change.
Cap monthly student loan payments
Second, O’Malley says the government should cap monthly payments on students’ loans, so that students making less money right out of college won’t risk falling behind.
Rather than making students contact their lender to enroll in Income-Based Repayment to reduce their monthly payment, he says that students should be automatically put on this plan, and contact their lender if they wish to make higher payments.
Current options for borrowers with high debt
While these initiatives are meant to address the student loan problem and can provide relief to borrowers, we believe the best solution is to minimize student loans from the start–by choosing affordable schools and maximizing your financial aid package. We help families do this and figure out how to save money on college.
Luckily, there are also options for students already suffering from student loan debt to reduce their debt burden and lower their interest rates. Our partners at LendKey allow borrowers to refinance both their federal and private student loans at interest rates as low as 1.90% APR.
We also help student loan borrowers figure out the best repayment plan for their situation so that they can stay on track with their payments and pay off their student debt faster.
Rising college costs must be addressed
While we agree that expanding Income-Based Repayment will certainly help borrowers avoid falling behind on their payments, borrowers must understand how quickly their interest can add up when making minimal payments.
Additionally, some experts worry that income-contingent repayment plans like IBR actually contribute to the student debt problem, by allowing borrowers to take out tens or hundreds of thousands of dollars for college without having to worry about repaying it all, giving colleges little incentive to lower their costs.
While we’re glad to see more options are being considered to help those suffering from student debt, we believe the focus should be on the root problem: rising college costs with no end in sight.
We work to help make college more affordable for college-bound students and families and help borrowers repay their student loan debt. If you’d like to learn how we can help you, call us at 1-888-234-3907 or contact us using this form.